Sherwin Williams Co. Earnings Cheat Sheet: Margins Shrink For Fifth Straight Quarter as Profit Falls

S&P 500 (NYSE:SPY) component Sherwin Williams Co. (NYSE:SHW) reported its results for the second quarter. The Sherwin-Williams Company is a manufacturer and distributor of paint, coatings and related products. Its three segments are: Paint Stores Group, Consumer Group and Global Finishes Group. While its professional, industrial, commercial and retail customers are mainly in North and South America, the company also has operations in Europe, Asia and the Caribbean.

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Sherwin Williams Earnings Cheat Sheet for the Second Quarter

Results: Net income for the specialty retail company fell to $179.1 million ($1.66 per share) vs. $181.7 million ($1.64 per share) a year earlier. This is a decline of 1.4% from the year earlier quarter.

Revenue: Rose 9.9% to $2.35 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: SHW fell short of the mean analyst estimate of $1.77 per share. Analysts were expecting revenue of $2.39 billion.

Quoting Management: Christopher M. Connor, Chairman and Chief Executive Officer, said, “Earnings in the quarter were at the low end of our guidance range due to high raw material costs versus the timing of our price increases. Although domestic demand remains soft, we continue to invest in selling, general and administrative expenses to maintain customer service and are encouraged by the improvement in domestic DIY and protective and marine sales in the Paint Stores Group. We are pleased with the continued growth of our architectural, protective and marine, OEM, and automotive finishes sales in the Global Finishes Group. Our operating segments continue to control costs and implement price increases in an effort to keep pace with rising raw material costs.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell 1.9 percentage points to 43.4% from the year earlier quarter. Over that time, margins have contracted on average 1.7 percentage points per quarter on a year-over-year basis.

Revenue has risen the past four quarters. Revenue increased 18.5% to $1.86 billion in the first quarter. The figure rose 18.6% in the fourth quarter of the last fiscal year from the year earlier and climbed 8.8% in the third quarter of the last fiscal year from the year-ago quarter.

The company fell short of forecasts after beating estimates in the previous two quarters. In the first quarter, it topped the mark by 11 cents, and in the fourth quarter of the last fiscal year, it was ahead by 7 cents.

Last quarter’s profit decrease breaks a streak of two consecutive quarters of year-over-year profit increases. Net income rose more than twofold in the first quarter and 11.6% in the fourth quarter of the last fiscal year.

Competitors to Watch: PPG Industries, Inc. (NYSE:PPG), The Home Depot, Inc. (NYSE:HD), Lowe’s Companies, Inc. (NYSE:LOW), The Valspar Corporation (NYSE:VAL), RPM International Inc. (NYSE:RPM), Tractor Supply Company (NASDAQ:TSCO), Builders FirstSource, Inc. (NASDAQ:BLDR).

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(Source: Xignite Financials)

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